“If you take care of your money today, your money will take care of you tomorrow”.

1. PERSONAL FINANCIAL
PLANNING
CLASS:
1ST
M.COM
COLLEGE:
St. Aloysius college, Mangalore
EMAIL ID:
Prithvi_rani@yahoo.com

2. ABSTRACT
Most people nurture dreams of owning a bigger house or car, exploring the world, giving
their children the best possible education, a blissful retirement, etc. Basically, these dreams
are life goals. But in order to meet these goals there is a need for a yardstick which will help a
person in achieving his life goals. Personal Financial Planning can act as a yardstick in
achieving our goals. Personal Financial Planning is the process of developing a personal
roadmap for our financial well being. The output of the personal financial planning tells us
how to use our money in achieving our goals, keeping in mind inflation, real returns, and
taxes. It is vitally important for an individual to set up a personal financial plan in order not to
experience hardships and financial difficulties in the future. Financial plan assure financial
stability and financial freedom that one wants to possess till the end of his/her life.
This paper will speak about the role of the personal financial planning in our life and will
state that people without financial plans face substantial pain/suffering/unhappiness in their
future. It also tries to emphasis on the importance of financial planning and the benefits
enjoyed by people who undertake personal financial planning. As most of the people do not
plan on their savings and expenditure in advance, thus they fail to use financial opportunities
effectively. The paper tries to find out different ways in which people can be made aware of
the personal financial planning, so that, people can achieve their all possible goals in future,
because “when you know better, you do better”. In this paper it is also discussed about
different investment avenues by which we can increase our wealth which can be use for our
better future.

3. PERSONAL FINANCIAL PLANNING
INTRODUCTION:
“By failing to prepare, you are preparing to fail”
There are certain desires and needs which everyone wants to be fulfilled. These desires and
needs can be life goals of a person. Some people may have already discovered their life's
meaning and others are still searching, but without doubt we all have one. Financial Planning
is the process of meeting the life goals through the proper management of our finances. Life
goals can include buying a house, saving for our child's higher education or planning for
retirement. The sooner one takes control of one‟s finances, the sooner he/she can start
putting them to good use, which helps in improving the quality of lives and achieving his
life‟s goal.
We don‟t have to be mega rich to have a financial plan. Neither do we have to be very old
and approaching retirement. It does not matter how much we earn or what our age is. All of
us have something to plan for. In fact, our financial situation influences almost every aspect
of our lives….from the type of house we live-in, to the type of car we drive, to how many
vacations we can take. Regular financial planning can help in giving us peace of mind. So it
is vitally important for the individual to set up a personal financial plan in order not to
experience hardships and financial difficulties in the future. Financial plan assure financial
stability and financial freedom that one wants to possess till the end of his/her life.
Objective:
Helps us to know the importance of personal financial planning in our life.
Helps to discover the different investment avenues available and helps to plan better
investment portfolio.
Emphasize on benefits and importance of personal financial planning and also focus
on consequences faced for not planning on finance.
MEANING:
Financial planning is a systematic way of planning an investment to get maximum returns
with minimum risk. It is the process of developing a personal roadmap for our financial well
being and it tells us how to use our money to achieve our goals, keeping in mind inflation,
real returns, and taxes.
It is a step by step process to ensure that you plan and invest in a way so that you are
constantly in sight of our goals and the effort that is required to achieve them.

4. With a Financial plan, we should be able to do the following:
Set and prioritise our life goals
Take stock of existing finances and the role they will play in meeting the goals as also
whether the current set of investments are the right ones for us.
Identify the right investment instruments including how much insurance and/or a
contingency reserve should you have to take care of your dependents.
Track our investments and Set milestones of execution and review
Interestingly, a lot of people spend their time with the last step. The first three are very
critical for the overall exercise to be successful.
Benefits of Financial Planning:
Here‟s a list of the benefits that a well chalked out financial plan can bring about:
Helps monitor cash flows and reduces unnecessary expenditure.
Enables maintenance of an optimum balance between income and expenses.
Helps boost savings and create wealth.
Helps reduce tax liability.
Maximizes returns from investments.
Creates wealth and ensures better wealth management to achieve life goals.
Financially secures retirement life.
Reviews insurance needs and therefore also ensures that dependents are financially
secure in the unfortunate event of death or disability.
Importance of Financial Planning:
Planning our financial future is one of the most important things we can do in our life.
Every successful aspect of our life requires planning, whether it is planning a weekend, or
planning a yearlong home improvement project. Personal financial planning could be the
most important of all, because it can secure ours and our loved ones futures. The following
points explain why financial planning is important.
Cash flow: financial planning helps in increasing cash flow as well as monitoring
the spending pattern. The cash flow is increased by undertaking measures such as
tax planning, prudent spending and careful budgeting.
Capital: A strong capital base can be built with the help of efficient financial
planning. Thus, one can think about investment and thereby improve his financial
position.
Income: It is possible to manage income effectively through planning. Managing
income helps in segregating it into tax payments, other monthly expenditures and
savings.

5. Family security: Financial planning is necessary from the point of view of family
security. The various policies available in the market the purpose of financially
securing the family.
Investment: A proper financial plan that considers the income and expenditure of
the person helps in choosing the right investment policy. It enables the person to
reach the set goals.
Standard of Living: The savings created through planning come to the rescue in the
difficult times. Death of the bread winner in a family, affects the standard of living
to greater extent. A proper financial plan acts as a guard in such situations and
enables the family to survive in hard times.
Financial understandings: The financial planning process helps gain an
understanding about the current financial position. Adjustments in an investment
plan or evaluating a retirement scheme becomes easy for an individual with
financial understanding.
Assets: A nice „cushion‟ in a form of assets is what many of us desire for. But
many assets come with liabilities attached. Thus it becomes important to determine
the true value of an asset. The knowledge of settling or cancelling the liabilities
comes with the understanding of our finances. The overall process helps us build
assets that do not become the burden in the future.
Savings: It is good to have investments with high liquidity. These investments,
owning there liquidity, can be utilized in times of emergency and for educational
purposes.
The Consequences of Not Planning Your Finances:
People without financial plans are at a great financial disadvantage compared to people with
sound financial plans. Thus, if happiness comprises financial security and strength, while
pain/suffering usually means the lack of happiness, we can say that people without financial
plans indeed incur more suffering compared to who have plans, based on this monetary
component of happiness.
The outcome of not planning our finances can affect our life in the short and long terms in
many ways such as:
Not knowing what happened to our money,
Just getting by instead of enjoying life,
Family conflicts over money,
Never discovering or realizing our mission in life,
Always being caught off guard when unexpected challenges arise.
After some time of suffering through these effects it's easy for a cloud of discouragement to
fall over your face and your general outlook on life becomes pessimistic.
On the other hand, we're not supposing that we can look into a crystal ball to tell you today
everything that's going to happen in your life, but instead take into account likelihoods which
affect everybody and can be adapted to our personal objectives. This is enough to allow us to
plan.

6. DifferentAvenuesofInvestmentsforanIndividual
In the modern financial system there are so many investment avenues for an individual to
choose from today in financial market so that he can save money and earn from his savings.
Some of these investment avenues offer attractive returns but with high risks and some offer
lower returns with very low risks. These investment avenues are:
Equity: Equity is an investment avenue which is able to offer the highest possible returns but
is very risky. This can offer returns in range of 15- 50% annually in good times and negative
returns of 5-15% also.
Mutual Funds: Mutual funds offer moderate returns but are less risky compared to equity
investments. They can offer a return between 12-30% annually in good times. May be even
higher in good times and negative returns of 5-10& annually.
Bonds: These have very less risks so offers lower returns. The return from bonds ranges
between 7-10% annually.
Commodities: These investments are made in commodities such as rice, wheat, metals. This
is very tricky investment. Return from these investments varies between 10-35%. One should
be able to understand the weather, crop cycle and market dynamics.
Bullion: Bullion is the part of commodities. One can invest in gold, silver and platinum.
These fetch high returns but are also very volatile.
Real Estate: One can also invest in real estate. This investment offers attractive return. But
the price fluctuation in bad times very high. And one needs lakhs of rupees to get started in
this market.
Govt. and RBI Bonds: These offers fix rate of return over period of time.
Company Bonds: These are same as govt. bonds. Only difference is that these are more
risky.
Post Office Investments: These are the risk free investments. And offer lower return.
Insurance: Insurance has become one of the most important investment avenues in India.
Unit Linked Insurance Plans are very popular in India besides the traditional endowment
policies.
Provident Funds: This is one of the safest long term investment option. This is mainly
for retirement purpose.

7. There are so many other options available such as carbon trading, currency trading, power
trading and so many. One should choose investment avenues according to her/his financial
goal and knowledge about the financial instruments.
Spreading Awareness of Personal Financial Planning
“If you take care of your money today, your money will take care of you tomorrow”.
Everyone should make a plan to save at least a portion of their income. Whether you chose to
save, or not to save, is a very important decision. The decisions you make regarding your
financial health today will affect you and your family for years to come, maybe even after
you die.
People must be made aware that things will not get any easier over the coming years, if they
have to lead their life happily in future they have to start planning early. Government can take
various steps to make people save their money for future use. Government has already
introduced various schemes for the betterment of the people. Some schemes has made
compulsory by the government like provident funds which will make an individual secured
with some amount of lump sum money after his retirement. There are other various schemes
like New Pension Schemes, Monthly Income Scheme.
Government must make aware of personal financial planning among individuals by
conducting seminars and campaigns at the work places, schools, colleges, universities. In fact
student should be educated about this so that they can plan better for their future so it has to
be added on in their syllabus.
CONCLUSION:
Personal Financial Planning is all about you. It provides step by step process to help us to get
where we want to go in life. Financial planning is one of the things that not many people
think about. However, financial planning in India is important to do because it can make our
life easier. While we cannot predict the future, we can certainly be better prepared for it.
The role of financial planning is simple; it allows us to follow our own personal financial
plan based on our own financial and non-financial situation so that financial objectives at

8. various milestones of our life can be accomplished. It helps to lessen the unexpected, so that
one would not meet with financial tragedies like nightmares come true. The best part of
personal financial planning is that our future will be more secure.
Of course, lot of awareness has to be made among the people about planning on their income
and expenditure because when they know better about their cash inflows and cash outflows
they can plan better for their future. You don‟t have to be mega rich to have a financial plan.
Neither do we have to be very old and approaching retirement. It does not matter how much
do we earn or what our age is. Start now. Even if you are in your mid thirties or forties, it‟s
better to start now than delaying it for another five years. Every day counts. “If you are
failing to prepare, you are preparing to fail”, it means that one has to plan in advance or else
we might face difficulties in achieving our goals in future. So it is vitally important for the
individual to set up a personal financial plan in order not to experience hardships and
financial difficulties in the future. Financial plan assure financial stability and financial
freedom that one wants to possess till the end of his/her life.